If the television networks of this fair country devoted half as much time and money to improving their programs as they spend trying to increase their profits, prime time would be Shangri-La and no one would ever want to leave it.
But the networks' great concern now has nothing to do with upgrading programming. They are obsessed rather with Fear of the Future, and the competition the coming television explosion--cable, pay-cable and other alternatives--will bring. As part of their strategy to insure themselves against threats real and imagined, the networks are lobbying with all their might and money for repeal of rules adopted in 1970 by the Federal Communications Commission (FCC) that prohibit them from controlling or making money from the syndication of programs they have already aired.
Hollywood producers, who sell programs to networks, usually at a loss, and then hope to make money later with syndication sales, look upon this network scheme as something even more horrible than another attack by the Pacific Ocean on their Malibu beach houses. In fact, many of them feel repeal of the rules would force them out of business entirely.
Like everything else in modern life, this great furious mess will eventually end up in the courts, but in the meantime, the battle being waged in Washington over the rules is among the most passionate and extravagant in the history of American enterprise, with the networks and their colossal power on one side, and the producers fighting, sometimes for their very economic lives, on the other. East (New York, where the network corporate headquarters are) is meeting West (Hollywood, where the producers are) the way Ali met Frazier.
The purse consists of roughly $800 million annually in syndication revenues but also an important claim on the future. The future of telecommunications in this country will to a large extent be the future of this country. Enormous forces are now at work dividing that future up. Seen from this broader perspective, the battle over syndication rights is but a skirmish in a great and continuing war, but it is a skirmish being fought with everything but the neutron bomb.
The 1970 Financial Interest and Syndication Rules have worked well and to the public's benefit. They have fostered a huge and growing independent production business in Hollywood--thus multiplying possible sources of programming--and they have encouraged increased competition in television by bolstering the fates and fortunes of independent stations, those not affiliated with networks, throughout the country.
However, Reagan-appointed FCC Chairman Mark Fowler, the mad monk of deregulation, is doing all he can to railroad the repeal through. It is not unprecedented for the FCC to behave like The Fourth Network, as much a friend to commercial broadcasting as the EPA allegedly has been to some polluters. But Fowler's plan is particularly nervy; it basically amounts to welfare for the networks. And for months it has looked as though Fowler would get his way. Now, however, there is growing doubt he will be able to deliver the commission votes he was counting on.
It seems the cries of outrage from Hollywood have not gone unheard. There are even reports that some of President Reagan's old Tinsel Town cronies have appealed directly to him at the White House and found a sympathetic ear.
Fowler's may in fact be the only sure vote for full repeal. There is talk now of compromise, of repealing the rules but with provisos, one of which would prohibit the networks from "warehousing" reruns--holding them off the market, after their network runs, in order to increase their value--or from showing favoritism to their own affiliates when selling reruns into syndication. But Arthur Price, president of MTM Enterprises in Hollywood, says the warehousing issue is meaningless (even a network executive calls it "a red herring") and that there is wide disagreement even on a definition of the term. The producers would oppose the so-called compromise just as vehemently as complete repeal. One moderately feasible solution would simply give the networks a percentage of rerun revenues, and no voice in deciding to whom or when they are sold. The producers oppose that, too.
In an effort to thwart Fowler and what appeared to be a runaway train, Reps. Timothy Wirth (D-Colo.) and Henry Waxman (D-Calif.) this week announced plans to introduce legislation that would override the FCC and forbid repeal of the rules for five years. The bill would also prohibit, during the same period, repeal of the prime-time access rule, which limits network prime-time programming to three hours Monday through Saturday, four hours on Sunday. It's another rule the networks want tossed out. The System
As the system works now, the "M*A*S*H" reruns viewers see on local stations--to cite one example--were sold to those stations not by CBS, which ran the show in prime time, but by 20th Century-Fox Television, which produced it. CBS made its money from "M*A*S*H" by selling advertising during its 11 happy years on the network. When the much-watched 2 1/2-hour finale to "M*A*S*H" was shown last month, less than two hours of that time period was devoted to actual program material. The rest was network and affiliate commercial time. CBS may have taken in $12 million on that one broadcast alone.
Production companies often lose money even on hit shows while they're playing first-run on the network. "Mary Tyler Moore," according to MTM's Price, showed not a penny of profit for the company during the seven years it played on CBS, while the network made millions. MTM lost money on each episode because the "license fee" paid MTM by CBS did not cover costs; this kind of deficit financing is common TV production practice. MTM made its money back later, when the show left the network and reruns were syndicated to local stations--but because the show began before the rules took effect, Viacom, then a CBS subsidiary which the network was required to sell off, gets 35 percent of those revenues.
Norman Lear revolutionized television and enriched American popular culture with "All in the Family," rejected by all three networks three years before CBS finally bought it (after a change in top management). But "Family" also began before the rules took effect and Viacom gets its 35 percent cut for syndicating the reruns. In addition, when the original deal was made, CBS was able to demand that Lear make the program using CBS-owned facilities, Lear says, thus increasing his costs. Lear, of course, opposes the repeal and spoke at an FCC open hearing last week, though he calls it "a mockery" partly because Fowler's mind, Lear thinks, is "1,000 percent made up."
The networks want the ad revenues from the network showings and they want the syndication money, too. And to judge from the massive, costly, exhaustive lobbying and pressure campaign they have mounted, they will stop at nothing to get everything. Indeed, if the syndication rules are repealed, it is widely believed the networks will next attack the FCC rule that restricts them to outright ownership of no more than five stations each. Fowler reportedly favors repeal of that one, too. The man is a veritable Santa Claus and the broadcasting industry wants Christmas every day.
"You talk about greed!" gasps Jack Valenti, president of the Motion Picture Association of America (MPAA) and a principal spokesman for the Hollywood producers opposing repeal of the rules. "If the networks take over this, it will absolutely be the end of competition." Should the rules be repealed, Valenti says, small independent production companies will be crushed and many independent television stations obliterated.
Many producers of TV shows say that the system as it stands isn't perfect. But they say repealing the FCC rules would give the networks not just more control, but virtually complete control. Dozens of industry, consumer, religious, labor and minority groups have joined together in coalitions to fight the incomparably well-heeled network effort, but FCC chairman Fowler went so far as to change the FCC's own procedures in his efforts to help the networks out. Under customary practice on matters of this magnitude, the FCC hears what are called oral arguments after all written comments have been submitted by interested parties. But there's a problem for Fowler. Two FCC commissioners thought to be pro-network on this issue, Stephen A. Sharp and Joseph R. Fogarty, will leave the commission at the end of June, when the FCC shrinks from seven members to five. That would make it tougher for Fowler to get the syndication rules revoked. So the oral arguments were heard early and FCC sources expect a decision before the end of June.
"It's outrageous," says Valenti. "It is unprecedented to hold oral arguments until reply comments are in. Fowler did this with no notice at all. We've got it on the records so if we have to, we can go to an appeals court and hang him." Samuel A. Simon, executive director of the Telecommunications Research and Action Center (TRAC), says, "It seems like Fowler's rushing it because he wants it to come out the way he wants it" and says Fowler's "unusual and extraordinary procedures . . . discouraged some people opposed to the repeal from coming to the hearings and testifying. They thought it was just a farce."
The networks boohoo that the rules as they stand prevent them from competing with new technologies that threaten them. They say that pay cable gold mines like Time Inc.'s Home Box Office can make bigger and better deals with top producers because HBO is allowed to share in the ancillary revenues of programs it shows. And this unfair competitive situation, the networks claim, will impair their ability to lure the top people and top shows, and free TV will plunge into decline (Whatttt??? It'll get worse???).
MTM's Price says television will become worse indeed if the rules are repealed. "What you're going to see is a diminishing of production values," he predicts. "Why would anybody continue to make productions of the caliber of MTM's 'Hill Street Blues' and 'St. Elsewhere' when you've got a partner down the road who's going to take away your profits? I'm not going to make another 'Hill Street' under those conditions."
Asked if "Hill Street Blues" operates at a deficit as "Mary Tyler Moore" did, Price says, "I think we're going to build a monument with the deficits from that show."
And as for network claims about unfair competition from HBO and other pay TV companies, Price says, "The networks are actually forcing the speed with which everybody goes to work in pay television, because producers will figure, if you're going to gamble, you're better off gambling with some guy who doesn't have his hand in your pocket."
Other opponents of repeal say the "free TV" argument is pure smoke. They point out that all three networks are heavily invested in cable TV anyway. But the networks have gone to minority and citizens' groups claiming that their beloved free TV is endangered--and also, not so incidentally, promising more specialized programming for them if they join in supporting repeal. An NBC spokesman says groups "representing 33 million people" support the repeal. Simon says, "That is an outright and unadulterated lie." And he accuses the networks of virtually bribing such groups to join their ranks before the FCC.
Of the networks' promises to increase minority programming once the allegedly inhibiting rules are revoked, Lear says, "If it wasn't so serious, you could hurt yourself laughing. Where have the networks been on this one? It was so hard to get them interested in 'Sanford and Son' a show with a black cast you wouldn't believe it. The fact that they can say they need more money to get minorities on the air ought to get the whole Congress laughing."
There is nothing in the financial interest and syndication rules that prevents the networks from doing minority programming and nothing in repeal of the rules that would guarantee or encourage more. Pieces of Cake
It could be said the television networks operate this way: They want to have their cake, eat it too, and then eat your cake. On the one hand the networks are saying they need legislated relief to protect them from incursions by newly emerging media. On the other, they boast that they will remain for years to come America's primary source of news and entertainment.
"When they go to their security analysts and to their stockholders, the networks say, 'We're going to be the dominant medium for the foreseeable future, we're going to have 70 to 75 percent of the marketplace, and our audience is going to be larger in 1990 than it is today," says Valenti. "Then they go before the FCC and say, 'Hey fellas, if you don't give us this freedom, we're going to be dead, these cable guys are going to kill us.' " CBS' own research estimates that in 1990, the three networks will be taking in from $15 billion to $20 billion, while the pay cable industry will earn in the neighborhood of $6 billion to $8 billion, with the networks still commanding 70 percent of all prime-time viewing.
Why should Mr. and Mrs. America give a hoot about all this acrimonious rigamarole, this clash of titans? As TRAC's Simon says, it's perceived in some quarters as a fight involving "one Rolls-Royce against another Rolls-Royce." Valenti charges the FCC encouraged this impression in the way it set up the panels for last week's day of hearings. "I think they want it to appear like it's the networks vs. Hollywood, Goliath against Goliath," Valenti says. "But that isn't true. It's the big producers who will survive, while the small ones won't." Valenti predicts Paramount TV ("Happy Days," "Winds of War") will suffer but survive, whereas companies like Lorimar ("The Waltons") will go under. "The independent syndicators won't survive, either, and some of the independent television stations won't. And the advertisers who will end up paying more money for commercial time will pass that along to their customers."
Valenti says an MPAA survey shows that "in all markets where there are two or three strong independents, the ad rates as a whole have gone up half as fast as those markets where there is one or less independent station in the market place." The syndication rules have helped these independent stations prosper. John Rose, vice president and general manager of WDCA-TV in Washington, told the FCC that "the last 10 years have seen the greatest growth in number and prosperity of independent TV stations in history." In 1971, Rose says, independent stations as a group lost $24 million. In 1980, combined profits of independent stations totaled $159 million. And have the networks suffered as a result? It doesn't appear so. According to figures supplied to the FCC by Valenti, total network revenues grew 312 percent from 1970 to 1981 and during roughly the same period, network profits grew by 550 percent.
Awwww, the poor little networks!
The repeal of the rules would have an effect on what viewers see on their TV screens, because it would give the networks even more control than they now have over program content and over what is available--not just on network stations, but on independent stations throughout the country. The potential harm to the viewing public was summed up in a statement about the proposal from Action for Children's Television (ACT), one of dozens of consumer and industry groups opposing the change. Wrote ACT president Peggy Charren, "The financial interest and syndication rules cannot guarantee TV program diversity, but repealing the rules would automatically concentrate more power in the hands of the commercial networks. That can only lead to less diversity, less concern for the public, and less programming for young audiences."
It may not sound like such a great public service to ensure that off-network shows be readily available to independent TV stations. After all, shouldn't the independent TV stations create their own shows, instead of just buying and airing network hand-me-downs? In fact, the money they make with the off-network shows has helped independents band together and finance such acclaimed productions as last year's Emmy-winning "A Woman Called Golda" starring Ingrid Bergman and enabled them to buy such network-rejected, high-toned productions as "Smiley's People," starring Alec Guinness.
The fight goes on. There are indications it is getting dirty. Simon says NBC not only refused to participate in a TRAC conference on the subject, but tried to "sabotage" it by urging others not to participate. An NBC spokesman says that is "absolutely not true" and that NBC chose not to participate because it perceived TRAC as a partisan, anti-network group. Ironically, Grant Tinker, chairman of NBC, was head of MTM Enterprises when the rules were enacted. He is now in the odd position of defending the repeal, and will probably do that when he faces an audience of Hollywood producers for a speech in late April at the TV Academy in Los Angeles.
Valenti says the Hollywood community speaks with one voice on this one. "In the 17 years I've been on this job, I've never seen the mutually antagonistic industry that I preside over so unified." He also confesses, "The heat of battle makes me work harder" and says the networks have hauled out "the 16-inch guns" for the current campaign.
He has few kind words for FCC Chairman Fowler. "The rules that have protected the powerless are the rules that he's trying to change," says Valenti. "I think it's wrong for all the power in communications in this country to be wielded by a very, very few people."
Valenti says he has three key questions for Fowler, and has put them to him. "I said, 'Mr. Chairman, if you can answer these questions honestly, then I'd be satisfied with whatever decision you make.' Question No. 1--What is the public interest reason that compels the abolition of a rule that has worked so well for 13 years? What is there in the public interest? The FCC doesn't exist for the networks and it doesn't exist for producers. It's there to serve the public.
"Question No. 2--Will the abolition of this rule create more competition in the marketplace or less? If you believe, as I think most Americans believe, that competition is in the interest of the consumer, then you have only one way to vote.
"And third, do you think it is in the public interest to give the networks more power, or less power? Answer those questions, Mister Chairman, and I'll be most satisfied with the way you vote, if your answers track with your final decision."
So far, no reply.